Treasury’s Stealth Tax Hikes Slammed

Tax bracket creep has cost South Africans tens of thousands of rand, while government fails to cut waste and recover lost revenue,

The Organisation Undoing Tax Abuse (OUTA) has submitted its response to Parliament on Budget 2025, strongly rejecting National Treasury’s proposals to increase VAT and once again, freeze personal income tax brackets. These proposals, OUTA argues, unfairly punish South Africa’s already overstretched tax base while government continues to ignore the urgent need to address corruption, waste and inefficiency.

OUTA’s submission highlights the silent yet devastating impact of tax bracket creep. Since 2012, Treasury has adjusted personal income tax brackets below the official inflation rate in 11 out of 14 years. As a result, South Africans have endured a cumulative 26 percentage point disadvantage due to inflation.

“For a middle-income earner on around R350 000 per year, the failure to adjust brackets in line with inflation has cost them over R85 000 in extra taxes since 2012,” says OUTA CEO Wayne Duvenage. “This is a stealth tax that Treasury has imposed by not adjusting tax-bracket increases to keep pace with inflation, thereby hitting the pockets of ordinary citizens while service delivery declines.”

In Budget 2025, Treasury has proposed no adjustment to tax brackets for the second year in a row, adding yet another layer of financial strain to overstretched taxpaying individuals.

In addition to bracket creep, Treasury plans to increase VAT by 0.5 percentage points in 2025/26 and another 0.5 points in 2026/27, raising the VAT rate to 16%. OUTA argues this will deepen inequality, placing a disproportionate burden on low- and middle-income households, whilst impacting negatively on employment and business investment in South Africa.

“South Africans are being punished for government’s failure to address inefficiency and corruption,” says Duvenage. “We are overtaxed and under-serviced. Taxpayers have had enough of this abuse.”

OUTA is calling on the Standing Committee on Finance and the Select Committee on Finance to reject Treasury’s proposals and demand a fundamental shift in government’s approach to fiscal policy.

OUTA’s submission is not just a rejection of Treasury’s proposals. It provides practical, actionable solutions that can address the fiscal crisis.

• According to SARS Commissioner Edward Kieswetter, there are at least 100 000 individuals earning over R1 million per year who are not registered for tax. Bringing them into the tax net could generate an additional R100 billion. Illicit trade, particularly in tobacco and alcohol, costs the country an estimated R30 billion annually in lost revenue.
• The National Treasury’s own GTAC spending reviews identified R36 billion in potential savings over three years by cutting programmes that deliver below-average social value. Reports from the Auditor-General and independent bodies estimate R200 billion is lost annually to corruption, inefficiency, and wasteful expenditure.
• OUTA calls for a downsized Cabinet. South Africa has 75 ministers and deputy ministers – one of the largest executive bodies in the world. Rationalising this structure could save hundreds of millions annually.
• VIP protection services cost R3.9 billion a year and OUTA believes a focus on rationalising and reducing costs in this area, could produce a significant reduction in these costs that could save nearly R1 billion annually, with funds redirected to key public services like the NPA, Hawks, and Special Investigating Unit.
• The number of public entities has ballooned from 100 to 279 between 1999 and 2019. OUTA urges Treasury to evaluate and sell non-core SOEs, potentially generating significant tax revenue and reducing government liabilities.
• During 2024, OUTA identified R55.5 billion in accumulated surpluses across 26 entities in the Department of Higher Education alone. We believe entities under other departments have similarly accumulated surplus funds. Legislative amendments could empower Treasury to reduce the amount of SDL levies to specific SETAs and reallocate funds to other areas or reduce our national debt.
• Despite the downturn in commercial property rental rates post-Covid-19, many government departments continue to pay inflated lease rates. OUTA calls for a comprehensive review of all state leases and better utilisation of state-owned properties.
• OUTA also calls on a review of the number of people occupying board positions within state entities, as well as the fees and number of meetings held by numerous boards who, in many departments such as ATNS, ACSA, Sanral, many of the SETA’s and NSFAS, have failed to exercise meaningful oversight on the mismanagement and financial affairs of these organisations.

OUTA calls on the Standing Committee on Finance and the Select Committee on Finance to reject the unjust VAT and personal income tax proposals and demand accountability from Treasury.

“South Africans cannot be expected to shoulder more taxes while billions are wasted, lost or stolen,” says Duvenage. “Parliament’s Finance Committees have a duty to hold Treasury accountable and demand a responsible, efficient government that serves its people.”

“We refuse to support a budget that seeks to balance the books on the backs of citizens while government continues to lose billions to corruption and inefficiency,” concludes Duvenage. “South Africans are overtaxed and under-serviced. It’s time for Treasury to clean up its own house before asking taxpayers for another cent.”